While every industry has its own array of job titles and insider terminology, the real estate world might be one of the most perplexing. When you hear terms like broker, Realtor, real estate agent, or salesperson used interchangeably or perhaps in the same sentence, it can be tough to tell the difference. Do they all do the same thing? What is a real estate broker’s job, if not to sell your home directly?
To better understand the difference between a real estate agent and a real estate broker, we reviewed industry resources from the National Association of Realtors and spoke with Lonnie Bush, owner, CEO, and principal broker of Lonnie Bush Real Estate in Virginia Beach, Virginia. An unconventional broker in his own right, Bush shared valuable insights into the role of this oft-misunderstood title.
First, a quick roll call
With the caveat that each state’s real estate licensing requirements and resulting titles will differ (for example: in South Carolina, new agents earn a Real Estate Salesperson license; in Oregon, all agents are licensed under the title of Broker and earning a Principal Broker license would be the next step), here are the most common titles of a person involved with real estate sales, and what those titles typically mean:
- Real Estate Agent/Salesperson: This is an individual who has successfully met their state’s requirements for earning a real estate sales license, which involves completing formal classroom training and passing the state’s real estate license exam. Agents usually work as independent contractors rather than traditional employees.
- Realtor: This is a real estate agent who has joined the National Association of Realtors (known as NAR). Membership requires paying annual dues and adhering to NAR’s guidelines for ethics and code of conduct that go beyond state-specific regulations. While joining NAR is typically not a requirement at most real estate firms, members have access to additional resources and industry data compiled by NAR, and the brand is largely well-respected.
- Real Estate Broker: Brokers are agents who have successfully completed further real estate education and passed their state’s real estate broker exam. Once licensed, brokers can choose to continue working as independent agents, or they can assume a leadership role and have agents working under them.
How does an agent become a real estate broker?
There’s no shortage of real estate agents in the United States, but there are far fewer licensed brokers. Data indicates that more than two million people hold an active real estate license and 1.3 million of those are registered as Realtors, with just 34% of whom hold some version of a broker’s license.
In order to “upgrade” a real estate license from salesperson to broker, most states require that agents work a certain number of years (three is a common criterion), attend additional education courses, and pass a state-issued broker’s license exam.
If you’re curious to learn more about your state’s specific licensing requirements for agents or brokers, the Association of Real Estate Law Offices (ARELLO) maintains a list of each state’s real estate licensing authorities. You can also run a quick web search for “[your state] real estate license” to find the official authority board.
What are the different types of brokers and what do they do?
It’s not uncommon to see the terms “principal broker,” “managing broker,” or “broker-in-charge” to differentiate brokers who are working in a supervisory role.
Brokers who hold a broker’s license and choose to continue working independently, under a principal or B-I-C, might be referred to as an “associate broker” or simply a “real estate broker,” as with the prior example of Oregon’s license.
Some agents wish to earn their broker’s license for the additional training and prestige of further certification, meaning that the effort isn’t always born from a desire to manage a firm’s branch or start one’s own real estate company.
For purposes of this article, we’re focusing on the activities of principal brokers, or brokers-in-charge. These brokers provide high-level support to their agents in a variety of ways, including:
- Training and coaching
- Contract verbiage
- Legal issues
- Client challenges
- Assessing market value
- Marketing strategy
- Administrative support
Often, brokers are working hard behind the scenes on brand strategy and growth, while remaining available for agent support and training.
A broker might also provide sales leads to their agents. The preferred system for doling out leads can vary, but this might be done on a rotating basis from one agent to the next; leads might be reserved either for top-performing agents or for those who are just getting started in the business; or it might be as straightforward as a lead being routed to whoever happens to be available at the time of the opportunity.
How do brokers get paid?
While there are numerous pay structures for real estate agents and brokers alike, brokers in a leadership role will typically earn 100% of the commission from their own deals, and a percentage of the commission earned by their agents.
So, to offer an example, let’s say that you — the seller — will pay a 6% commission on the sale of your home. In most cases, your agent would share this commission with the buyer’s agent, leaving each with 3%.
For simplicity, we’ll say that your house sold for $100,000, which makes the commission $6,000, which means each agent earns $3,000.
Within their respective companies, each agent will typically be paid on a certain commission split with their broker. Newer agents might be on a 50/50 split, meaning they would keep $1,500 and their company would keep $1,500. An experienced agent will likely have a higher split; let’s say your agent is on an 80/20 agreement. Here, they’ll keep $2,400 while their company gets the remaining $600.
From that $600, the managing broker will then earn their percentage. It may not sound like much with this example, but when a broker is overseeing multiple agents who are all selling properties at various price points, the earning potential can be favorable.
What does all of this mean for you as a seller?
In most cases, you’ll find an agent and work directly with that individual. It’s quite possible — perhaps even likely — that you’ll go through the entire real estate sales process and never meet the broker under whom your agent is working, but you can trust that the broker-in-charge is aware of your listing and ready to step up should your agent need his or her support.
This all helps to ultimately benefit you, the seller, because:
1. Brokers motivate agents
An effective broker will serve to motivate his or her agents in a way that better serves you as the client.
“The way we teach our agents is that they have to go in with the mindset of, ‘Mr. Seller, we could be best friends, but what I’m not going to do is I’m not going to tell you what you don’t need to hear,’” says Bush, who oversees 30 agents and, unlike many principal brokers, runs his company as a unified team rather than an office where everyone works individually.
This means that Bush’s agents aren’t going to sugarcoat the truth. If your yard needs work before the house goes on the market, they’ll tell you. If market conditions aren’t especially ripe, they’ll help you decide how to move forward.
“We’re always going to be honest with [sellers],” says Bush, “because we know that if we’re honest with them, it’s going to put us in the best position to get them the most money; which is, at the end of the day, the ultimate goal.”
2. Brokers provide agents with structure and resources
Real estate agents are salespeople, not administrators. When a principal broker implements support systems to assist agents with contracts, listing paperwork, and marketing materials, there’s not only less chance of someone dropping the ball with important details, agents have more freedom to spend their time assessing needs and directly serving their clients.
Bush runs his office with a support staff of 15 people, and he happily invests thousands of dollars each month on marketing for his company. Since all of his agents sell under his brand, everyone benefits from the exposure.
“When you have a high-quality, highly trained company that also spends a ton of money on marketing, they separate themselves from the rest,” says Bush.
3. Brokers are committed to agent training
While each state has continuing education requirements that every agent and broker must fulfill in order to keep their license active, good brokers understand the value of consistent, on-the-job training and coaching.
In particular, Bush counsels his team on negotiating.
“This is something we take a lot of pride in,” he says.
“We teach [our agents] how to negotiate, how to get the most money for the seller.”
This sounds like an obvious perk if you’re the seller, but it’s important to consider the distinction between an agent who is well-trained and thoroughly supported, versus an agent who might have little interaction with or support from their broker.
Agents who work alongside brokers who are actively involved — like Bush — are better equipped to think outside the box and offer effective solutions, which certainly works to your advantage when an offer comes in on your house with a price below asking and the buyer still wants a $4,000 allowance for new appliances and $3,000 in closing costs.
What else should sellers know about real estate brokers?
According to Bush: “Not all brokers are created equal.”
Considering the high number of people holding a real estate license — many of them only working part-time or keeping the license as little more than a personal hobby — Bush works hard to help his team of agents stand out as experts who are genuinely committed to the business.
“[Real estate] has this stigma with the public that agents don’t do anything. They just list your house on the MLS and sell it, and they make a ton of money and this, that, and the other. Well, the ones who really go out there and work it day-in and day-out, those [agents] are not the same as the ones that do it part-time.”
In short? Your rockstar agent probably has a rockstar broker right behind her.
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